Common use of Debt Restructuring Clause in Contracts

Debt Restructuring. As a result of the Corporation's insolvency in March 1995, the Corporation entered into agreements in March and April 1995 with its secured creditors and largest unsecured creditor, to restructure debt in the aggregate amount of approximately $22 million. In addition, in April 1995, an informal committee of the Corporation's unsecured antecedent trade creditors was established, and in August 1995, this committee recommended for approval by the Corporation's creditors and shareholders a voluntary restructuring of the Corporation's unsecured trade debt ("Debt Restructuring Plan"). In early 1996, the Corporation's shareholders approved and accepted the terms of the restructuring plan. The terms of the Debt Restructuring Plan are set forth in the Private Placement Memorandum dated January 2, 1996, a copy of which has been delivered to and is available for review by the Purchaser and its counsel upon request. Pursuant to the Debt Restructuring Plan, and as of October 31, 1996, the Corporation believes it has received and approved approximately $11,751,000 or 84% acceptances by its antecedent trade creditors. Outstanding antecedent debt of approximately $2,254,000 has not been settled. As of January 1997, the Corporation issued 1,587,473 shares of Series B Convertible Preferred Stock as payment of $3,175,000 of debt owed to qualified unsecured creditors under the Corporation's Debt Restructuring Plan. This stock is convertible into 10,583,682 shares of common stock. In addition, the Corporation and its secured creditors have converted approximately $15,000,000 in debt into approximately 50,000,000 shares of common stock. The Corporation and its secured creditors may elect, however, to keep the remainder of the secured debt outstanding until substantially all of this remaining unsecured antecedent trade debt has accepted the Corporation's Debt Restructuring Plan. THERE CAN BE NO ASSURANCE THAT THE CORPORATION WILL BE ABLE TO CONTINUE TO EFFECTUATE THE DEBT RESTRUCTURING. TO THE EXTENT THAT THE CORPORATION IS UNABLE TO CONTINUE TO EFFECTUATE THE VOLUNTARY RESTRUCTURING OR OTHERWISE REFINANCE OR CONVERT SUCH DEBT AND ADDITIONAL FUNDING IS NOT AVAILABLE, THE CORPORATION WOULD BE FORCED TO SEEK PROTECTION UNDER APPLICABLE BANKRUPTCY AND INSOLVENCY LAWS.